Arthur Sinodinos: The Coalition’s Probity Problem Returns

The NSW Liberals are facing a crisis after using a slush fund to hide donations and having millions of dollars worth of electoral funding taken away. For Malcolm Turnbull, it looks like the return of an all too familiar problem, writes Ben Eltham.

The New South Wales Liberal Party is embroiled in a major probity scandal, after the release of a devastating report yesterday by the New South Wales Electoral Commission.

Yet again, Arthur Sinodinos finds himself in the frame.

The scandal has blown up over donations to the Liberal Party via the shadowy Free Enterprise Foundation, a Liberal-linked “associated entity” that channels funds to the party.

In its devastating report released last night, the New South Wales Electoral Commission has effectively described the Free Enterprise Foundation as a sham charity, used by the Liberal Party to keep the identity of wealthy donors anonymous.

The Electoral Commission has based its decision on testimony to the Independent Commission Against Corruption, particularly its hearings in Operation Spicer that revealed the inner workings of the Free Enterprise Foundation for the first time.

As New Matilda reported back in 2014, the Free Enterprise Foundation had become the favoured vehicle for donors looking to make large and anonymous payments to the Liberal Party.

ICAC hearings implicated not just New South Wales Liberal Party officials such as Paul Nicolaou and Arthur Sinodinos (Treasurer of the NSW branch of the party when the Free Enterprise operation was in full swing) but also key federal players such as Brian Loughnane.

The Electoral Commission states:

The [Free Enterprise] Foundation commenced to be used well before 2010 as a means of offering anonymity to favourably disposed donors wishing to support the Liberal Party. This was not the sole function of the Foundation but it appears to have been a major part of its activities.

The use of the Free Enterprise Foundation as a money washing outfit for the Liberal Party is well known. Television mogul Reg Grundy gave $200,000 to the Free Enterprise Foundation in 2013. The director of Grundy’s investment company, Akira Investments told the ABC in 2014 that Brian Loughnane had advised the Grundys to donate via the Free Enterprise Foundation.

“I made enquiries of Mr Brian Loughnane and was advised by him that the best way to maintain their privacy would be to make the donation through the Free Enterprise Foundation,” Akira director Jo Cullen-Cronshaw told the ABC in a statement.

In its decision, the New South Wales Electoral Commission said that the Liberal Party has breached the Election Funding, Expenditure and Disclosures Act 1981, because it effectively concealed the identity of donors by routing payments through the Free Enterprise Foundation.

Moreover, the FEF was effectively a sham charity: dispensing its money not to a charitable activity, but to the Liberal Party. “When the Foundation purported to pay the money to the Liberal Party in the abovementioned five large tranches of money,” the Electoral Commission’s decision states, “it was in truth acting as agent for the donors. At all times they were the true donors and their details should have been disclosed by themselves and the Party if the sums involved made them ‘major political donors’.”

As a result, the Commission is withholding more than $4 million in public funding to the Liberal Party, on the grounds that the New South Wales branch broke the state electoral donations laws.

That will have a serious impact on the party’s ability to campaign in the coming federal election.

Sinodinos has already been implicated in corruption investigation once in this term of government. He stood aside from the cabinet in March 2014 after his highly dubious role in the Eddie Obeid-associated Australian Water Holdings became the subject of an ICAC inquiry.

The source of this money was ultimately the New South Wales taxpayer, as AWH was allowed to charge the state government’s water utility Sydney Water for “administrative” costs that turned out to include lavish salaries and, yes, political donations.

Australian Water Holdings employed Obeid’s son, Eddie junior. Both Sinodinos and Eddie junior were at a meeting in February 2011 in which AWH CEO Nick Di Girolamo agreed to sell $15 million worth of shares, or 30 per cent of the company, to lawyer John McGuigan.

Sinodinos denies knowing that the Obeids were to be the ultimate owners of that stake, but AWH director John Rippon told ICAC this week that “everyone” at the company knew the Obeids were buying in. As we know from previous ICAC inquiries, McGuigan was part of the dodgy Cascade Coal cabal that had formed a secret partnership with the Obeid family to sell coal mining leases in the Bylong Valley.

When Malcolm Turnbull took the prime ministership in September 2015, Arthur Sinodinos was a key factional player in his ascension.

Sinodinos was made the Cabinet Secretary, responsible for running the cabinet as the highest executive body of the Australian government. Needless to say, it’s a position that should require the highest standards of honesty and probity.

It’s often thought that Sinodinos has been “cleared” by ICAC over any imputation of corruption during his time at AWH. That’s not actually the case: ICAC has yet to report. Indeed, Sinodinos’ testimony at ICAC was far from impressive.

This time round, the problem for Sinodinos is not his role at AWH, but his role as treasurer and chairman of the finance committee of the state branch of the Liberal Party, where he accepted donations from the Free Enterprise Foundation. As we know, much of that money came to the Liberal Party via the FEF from property developers, who are banned from donating to political parties. According to the Electoral Commission, those donors should have been disclosed.

Sinodinos’ testimony on those matters before ICAC will now be closely scrutinised.

It’s yet another headache for Malcolm Turnbull, who has already had to reshuffle his cabinet twice. Former minister Mal Brough is still under Australian Federal Police investigation.

All in all, it’s not the start to the election campaign Prime Minister Turnbull would have wanted.